Determinants of Growth in Youth Owned Micro and Small Enterprises in Kenya

Abstract

The study sought to investigate the determinants of growth in youth owned Micro and Small Enterprises in Kenya. The research focused on seed capital, legal and regulatory environment, access to market and adoption of technology being independent variables on the growth of youth owned MSEs in Kenya. In the study, entrepreneurial characteristic was the moderating variable used. The study was guided by Resource-Based, Market Orientation, Adoption and Psychological Entrepreneurship Theories. Further, the research employed a descriptive survey research design with a sample size of 127 MSEs. Both primary and secondary data were used in this study. Primary data was collected using questionnaires as the main tool for data collection. The instrument was pretested for potential problems with the design and layout of the survey, to increase reliability, decrease measurement errors, and improve the validity of each construct measurements before the final test was launched. The study used quantitative and qualitative statistical measures to describe the relationships between the study variables. Descriptive statistics such as means, standard deviation and mode were used to describe the basic features of the data, provide simple summaries of the sample measures. Multiple regression was applied to examine the intensity of the variable links. Data analysis was facilitated by the Statistical Package for Social Sciences (SPSS Version). Finally, the data was presented using tables, graphs, and charts. From the study, it was revealed that many of youth owned MSEs faced challenges in accessing capital due to the high cost of credit evident in the high rates of interest, the high cost of accessing credit and the high cost of credit processing fee. MSEs were found not to be fully complying with the tax regime requirements due to multiple taxations from both the National and County governments. The study findings also established that MSEs face stiff competition in their different lines of business operations. Youth-owned MSEs lacked the capacity to acquire new technology, hence, face difficulties in innovating their products and services. The study found that determinants of growth components (access to capital, legal and regulatory, access to the market, adoption of technology and entrepreneurial characteristics) have a great positive influence on the growth of youth owned MSEs. Access to capital was most significant with a correlation coefficient of (0.784) elements of determinants of growth of youth owned micro and small enterprises in Kenya. The study concluded that fluctuating interest rates and high credit processing fee were the major issues that MSEs faced. The study also noted that high taxation was a major reason as to why some MSEs failed to comply with the requirement of the tax requirements. In the study competition was noted as a challenge facing a majority of the MSEs. The study findings further concluded that change in technology for youth owned MSEs was a major challenge. Finally, the study concluded that MSEs lacked innovation in their product/service development. This conclusion was arrived at by observing that many MSEs maintained their original products which indicate the slow pace of embracing innovation in their businesses. The study recommends the need to have clear loaning policies targeting youth owned MSEs. Both the National and County government should review their taxation system to ease the cost of business operations for MSEs. In addition MSEs need to be availed financial support to acquire appropriate technology. To increase MSEs market access, the County and National governments are recommended to increase their consumption of products and services from youth-run enterprises. Enhancing the studies recommendations will ensure that youth owned MSEs will be able to effectively contribute to the realization of Kenyans Vision 2030.